Mode of taking or accepting certain loans, deposits and specified sums and mode of repayment of loans or deposits and specified advances

The earlier provisions contained in section 269SS of the Income-tax Act provide that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is twenty thousand rupees or more. However, certain exceptions have been provided in the section. Similarly, the existing provisions contained in section 269T of the Income-tax Act provide that any loan or deposit shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the persons specified in the section if the amount of loan or deposit is twenty thousand rupees or more.

In order to curb generation of black money by way of dealings in cash in immovable property transactions section 269SS of the Income-tax Act is amended with effect from 01.06.2015 to provide that no person shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more.

Section 269T of the Income-tax Act also been amended vide Finance Act,2015 with effect from 01.06.2015 to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place.

Consequential amendments are also been made with effect from 01.06.2015 in section 271D and section 271E to provide penalty for failure to comply with the amended provisions of section 269SS and 269T, respectively.

EXTRACT OF RELEVANT CLAUSES FROM FINANCE BILL 2015

66. Substitution of new section for section 269SS.

For section 269SS of the Income-tax Act, the following section shall be substituted with effect from the 1st day of June, 2015, namely:—

‘269SS. No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account, if,—

(a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or

(b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or

(c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more:

Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by,—

(c) any corporation established by a Central, State or Provincial Act;

(d) any Government company as defined in clause (45) of section 2 of the Companies Act, 2013;

(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette:

Provided further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act.

Explanation.– For the purposes of this section,— (i) “banking company” means a company to which the provisions of the Banking Regulation Act, 1949 applies and includes any bank or banking institution referred to in section 51 of that Act;

(ii) “co-operative bank” shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949;

(iii) “loan or deposit” means loan or deposit of money;

(iv) “specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.’.

67. Amendment of section 269T.

In section 269T of the Income-tax Act, with effect from the 1st day of June, 2015,—

(A) in the opening portion—

(a) after the words “repay any loan or deposit made with it”, the words “or any specified advance received by it” shall be inserted;

(b) after the words “made the loan or deposit”, the words “or paid the specified advance,” shall be inserted;

(B) in clause (a), after the words “loan or deposit”, the words “or specified advance” shall be inserted;

(C) in clause (b), the word “or” shall be inserted at the end;

(D) after clause (b) and before the long line, the following clause shall be inserted, namely:—

“(c) the aggregate amount of the specified advances received by such person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such specified advances,”;

(E) in the second proviso, after the words “any loan or deposit”, the words “or specified advance” shall be inserted;

(F) in the Explanation, after clause (iii), the following clause shall be inserted, namely:—

‘(iv) “specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not the transfer takes place.’.

69. Amendment of section 271D.

In section 271D of the Income-tax Act, in sub-section (1), after the words “loan or deposit” occuring at both the places, the words “or specified sum” shall be inserted with effect from the 1st day of June, 2015.

70. Amendment of section 271E.

In section 271E of the Income-tax Act, in sub-section (1), after the words “loan or deposit” occuring at both the places, the words “or specified advance” shall be inserted with effect from the 1st day of June, 2015.

NOTE ON CLAUSES

Clause 66 of the Bill seeks to substitute section 269SS of the Income-tax Act relating to mode of taking or accepting certain loans and deposits.

The existing provision contained in section 269SS provides that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is twenty thousand rupees or more.

It is proposed to substitute the said section so as to provide that no person shall take from any person, any loan or deposit or specified sum, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit or specified sum is twenty thousand rupees or more.

It is also proposed to define “specified sum” as any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property whether or not the transfer materialises.

These amendments will take effect from 1st June, 2015.

Clause 67 of the Bill seeks to amend section 269T of the Income-tax Act relating to mode of repayment of certain loans and deposits.

The existing provision contained in section 269T provides that any loan or deposit shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the persons specified in the said section, if the amount of such loan or deposit is twenty thousand rupees or more.

It is proposed to amend the said section so as to provide that any loan or deposit or specified advance shall not be repaid,

otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the person specified in the said section, if the amount of such loan or deposit or specified advance is twenty thousand rupees or more.

It is further proposed to define “specified advance” as any sum of money received, as an advance or otherwise, in relation to transfer of an immovable property and becomes repayable if the negotiations do not result in transfer of such immovable property.

These amendments will take effect from 1st June, 2015.

Clause 69 of the Bill seeks to amend section 271D of the Income-tax relating to penalty for failure to comply with the provisions of section 269SS.

The existing provision contained in section 271D of the Income-tax Act provides that if a person accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so accepted.

It is proposed to amend section 271D of the Income-tax Act to provide that if a person accepts any loan or deposit or specified sum referred to in section 269SS in contravention of the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so accepted.

This amendment will take effect from 1st June, 2015.

Clause 70 of the Bill seeks to amend section 271E of the Income-tax relating to penalty for failure to comply with the provisions of section 269T.

The existing provision contained in section 271E of the Income-tax Act provides that if a person repays any loan or deposit referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so repaid.

It is proposed to amend section 271 E of the Income-tax Act to provide that if a person repays any loan or deposit or specified advance referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified advance so repaid.

This amendment will take effect from 1st June, 2015.

(Article was first published on 28.02.2015 and republished with amendments on 04.06.2015)

29 Comments

Madhufcasays:

explanation 4 to Sec. 269SS defined “specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.’
My query is whether the word ‘otherwise’ includes Sale consideration of the Immovable Property.

I am of the opinion that Chapter XXB speaks of loans advance and deposits and its repayment hence ‘otherwise’ do not include sale consideration of Immovable Property.

Hello, i took Rs.2 Lakh interest free loan in form of Cash from my real elder sister for purchasing a home. My sister is unmarried and government employee. She is living with me at that home. Please tell me about any possibility of penalty under 269 ST and 269 SS. Please email me reply.

A school has paid the EMI of refinance of its school buses in cash. School is run by a Registered Society to the Cholamandlam Finances & Investments Ltd.
Agreement signed with option that we can pay by bank or cash or DD.
What about 269T section is such case.

In the context of a builder would the provisions of 269SS become applicable? As far as builder is concerned the flats that he/she is selling are not immovable property, they are just stock in trade for the builder.

Transactions of not just advance but other normal transactions of purchase of immovable property would be affected. “specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.

There is a doubt whether the above amendment is applicable on the receipt of Interest received from customers in cash and payment of delay possession charges in excess of Rs. 20,000/-. Please offer your comments in such case.

#This amendment is brought in to reduce black money transactions in the real estate sector. But it would be of little effect because the black Money transactions are all carried out in hard cash only, as usual# yes I agreed. But many times below 30L (registered value) transactions are not disclosed by the people. Its a welcome move to bring all the immovable transactions to the tax net irrespective of the registered value. I T people identify these transactions thro banking transactions

This amendment is brought in to reduce black money transactions in the real estate sector. But it would be of little effect because the black Money transactions are all carried out in hard cash only, as usual. It is an open fact that in many parts of India the real value of transactions are much above the guideline rates and the transactions in paper are for the guideline rates only so as to avoid not only Capital gains tax but also to avoid stamp duty. Now as usual the extra money would be paid in cash and the transacted value would be paid by any other mode other than cash(cheque/dd/transfer etc.,)